Credit-Card Fee Bill Advances

House Judiciary Committee approves legislation allowing negotiation of merchant fees

Published in CSP Daily News

WASHINGTON -- The U.S. House is moving to mandate that credit-card companies negotiate the fees they charge merchants for electronic transactions, escalating an intense battle between the credit-card industry and retailers, said the Associated Press. A bill—H.R. 5546, the Credit Card Fair Fee Act—passed Wednesday by the House Judiciary Committee on a 19 to 16 vote is backed by retailers, who accuse Visa Inc. and MasterCard Inc. of levying excessive fees. Card company executives counter that the legislation would simply push more of the cost onto consumers.

The interchange fee, [image-nocss] which Visa says averages about 1.6%, differs depending on the merchant and type of card. The fees are set by Visa and MasterCard, but are collected by the merchant's bank as part of a larger charge for processing the transaction. The credit-card companies say they do not receive revenue from the fees.

Retailers complain the fees are set collectively by the credit-card companies and large banks and are presented to merchants as a "take it or leave it" offer. Visa- and MasterCard-branded cards account for 80% of the credit-card market, according to the report.

Steve Pfister, senior vice president for government relations at the National Retail Federation (NRF), called the bill "a sensible solution to an escalating problem that's costing consumers more every day."

But Josh Floum, Visa's general counsel, said in a prepared statement that the bill "would mandate unnecessary regulatory intervention into a fiercely competitive industry that is benefiting consumers, merchants and financial institutions."

Edward L. Yingling, chief executive of the American Bankers Association (ABA), agreed and said the bill "is simply an effort by the merchant community to have government step in to reduce their cost of doing business."

The National Association of Convenience Stores (NACS) said, "With an unusual bipartisan vote on final passage, the House Judiciary Committee approved H.R. 5546…. This is the result of the hard work of the authors of the bill, Chairman John Conyers (D-Mich.) and Rep. Chris Cannon (R-Utah). Their efforts, combined with the successful grassroots phone calls, letters and meetings that retailers initiated over the past few weeks, proved that even the small guy can take on the two-ton elephant in the room as long as they are on the side of fairness. This first step in the legislative process is a huge win for NACS members."

"The days when Visa and MasterCard are able to impose exorbitant fees on consumers are numbered. Now that Congress and the public are learning how credit card fees are driving up the price of gas, food and other necessities, the big credit card companies are in for a very rough ride," said NACS Chairman Richard Oneslager. "On behalf of our retail members and their customers, NACS applauds Chairman John Conyers and the members of the House Judiciary Committee who stood together to pass H.R. 5546. This strong show of bipartisanship vindicates the efforts of thousands of NACS members who have taken the issue of outrageous credit card fees and practices to Congress. We look forward to similar bipartisan support by the full House and Senate."

The key component of this vote is the bipartisan effort that went into producing a solid piece of legislation, said NACS. The House Judiciary Committee is not normally known for crossing the aisle to work together, but the bipartisan effort made by members was historic; 10 Democrats and nine Republicans joined together to help fix a broken market and provide an opportunity for retailers to negotiate their interchange fees.

Those who lead the charge against the legislation made arguments that simply were either not true or illogical. The group of members determined to derail the bill included Reps. Debbie Wasserman Schultz (D-Fla.), Artur Davis (D-Ala.), Mel Watt (D-N.C.) and Jim Sensenbrenner (R-Wis.). These members attempted to protect banking interest by saying there wasn't enough information to proceed with the bill and that the markup should be postponed until they could learn more about it. They also tried to change the bill with several poison pill amendments, all of which were defeated in bipartisan votes.

In addition to the sponsors of the bill, other committee members who should be applauded are Reps. Dan Lungren (R-Calif.), Ric Keller (R-Fla.), Zoe Lofgren (D-Calif.) and Shelia Jackson Lee (D-Texas). These four members showed that they understand the complex market forces at work when it comes to interchange fees, and articulated retailers' concerns as to why this bill functions as the best solution to a broken market, said NACS.

In particular, the association added, Keller dispelled the myth that retailers would just take any savings they received and pocket them without passing on any benefits to the consumer. He quoted from the May 15, 2008, hearing in which NACS vice chairman of government relations Tom Robinson, CEO of Robinson Oil Corp., testified that in such a competitive market it would be impossible not to pass on any savings to the consumer, especially in the petroleum industry where companies are competing on a penny-per-gallon basis.

Other industry groups praised the development. The Society of Independent Gasoline Marketers of America (SIGMA), said, "Hard work clearly paid off for SIGMA members who lobbied for H.R. 5546, the Credit Card Fair Fee Act, on Capitol Hill…and by calling and writing letters to their Congressional representatives over the past few weeks. The bipartisan vote by the House Judiciary Committee on the final passage of the Credit Card Fair Fee Act yesterday is a huge step for gasoline marketers to be able to negotiate interchange fees. The grassroots efforts do not stop here, however. Now the bill will move on to the full House, so contacts with your representatives remain crucial."

And the Petroleum Marketers Association of America (PMAA), said, "Thank you to all who made calls and sent letters supporting H.R. 5546; your efforts made a real difference. Earlier this afternoon the House Judiciary Committee approved that bill, the Credit Card Fair Fee Act, cosponsored by Committee Chairman John Conyers and Representative Chris Cannon by a vote of 19-16. The Committee not only reported the bill with 10 Democrats and nine Republicans voting to report it, but defeated every poison pill amendment by similar bipartisan margins…. If enacted, this bill will allow merchants to negotiate interchange fees with Visa and MasterCard, creating both transparency and market pressure on unfair fees."

Click herefor the voting roster.